China is shaping the factory of the future, while Europe—especially the DACH region—is struggling with the past. In particular, legacy IT and OT landscapes as well as fragmented data structures are holding back progress here—as indicated by the findings from the Industry 4.0 Barometer. Meanwhile, China is taking the lead in the areas of supply chain transparency, digital twins, automation, and AI. India, Mexico, and the U.S. are also modernizing and implementing changes faster than companies in the DACH region and the United Kingdom. These are key findings from the Industry 4.0 Barometer 2026, published by management and IT consulting firm MHP in cooperation with Prof. Dr. Johann Kranz of Ludwig Maximilian University of Munich (LMU).

Markus Wambach, Group COO at MHP: “Our data clearly shows: While China and the U.S. are consistently transforming their production to be software- and data-driven, the DACH region is failing to gain momentum. Only three percent of companies here are very familiar with software-defined manufacturing—in China and India, the figure is 30 percent. Those who fail to strategically integrate production control, data, and software risk their competitiveness.”

For the Industry 4.0 Barometer 2026, more than 1,200 individuals from industrial companies in the DACH region, the United Kingdom, the U.S., China, and—for the first time—India and Mexico were surveyed regarding their assessment of the status quo of Industry 4.0 within their own companies. The study highlights successes but also reveals gaps in the areas surveyed. These include supply chain transparency, digital twins, artificial intelligence (AI), and software-defined manufacturing (SDM).

Global digitalization rate rises to 68 percent

Internationally, the measured level of industrial digitalization continues to rise: The overall barometer value has increased from 48 percent in 2022 to 68 percent today across all areas. However, two regions have fallen significantly behind: the DACH region is stagnating at 57 percent, while the United Kingdom has dropped to 62 percent (down two percentage points from the previous year). Meanwhile, China has reached 72 percent (up three percentage points), the U.S. 69 percent (up three percentage points), India 68 percent, and Mexico 67 percent.

“Globally, the degree of digitalization in industry is rising, and Europe is also making progress,” says Dr. Johann Kranz, Professor of Digital Services and Sustainability at LMU Munich. “However, in a country-by-country comparison, the U.S. and China are implementing digital production technologies more quickly, in a more integrated manner, and on a larger scale than European companies. India and Mexico, which we are analyzing for the first time, also show better results in some areas.”

Causes of the Stalled Transformation

When digital transformation is slowed down, it is usually due to technical debt: heterogeneous legacy systems, fragmented data landscapes, and limited interoperability make the introduction of new technologies difficult. For example, 42 percent of the surveyed DACH companies view their data silos as an obstacle, while 52 percent cite their historically evolved IT systems. The situation is similar worldwide. However, these classic obstacles are being overcome at varying speeds. This is particularly evident in this year’s study in the three areas of digital twins, artificial intelligence, and software-defined manufacturing.

Digital twins are spreading faster than other technologies

These differences are particularly notable when it comes to digital twins: The barometer value for use in plants and machinery has risen from 54 percent to the current 62 percent, and in the logistics sector from 61 to 67 percent—representing the largest jump from an initial 30 percent (2022). As a result, digital twins are establishing themselves faster than any other technology surveyed. Across all application areas, China holds a clear leading position in digital twins. The logistics context is particularly pronounced: 84 percent of the Chinese companies surveyed rely partially or fully on this technology in that sector. They are followed by Mexico (74 percent), India (68 percent), the U.S. (61 percent), and the United Kingdom (54 percent). The DACH region brings up the rear with 42 percent.

DACH is stuck in the AI hype gap

China and the U.S. also play a pioneering role in the use of artificial intelligence in the production environment: When it comes to partial or full AI adoption, Chinese participants lead with 71 percent, followed by India with 61 percent and the U.S. with 57 percent. Mexico (51 percent) and the United Kingdom (48 percent) occupy the middle ground, while the DACH region lags behind at 37 percent.

The results show that many European companies are taking a rather cautious approach here. So far, they have only implemented AI on a pilot basis; deep integration into production processes is lacking. At the same time, the future impact of AI is highly rated; for example, 51 percent of DACH companies expect “significant” or “groundbreaking” effects in the coming five years. This gap makes it clear: without a solid foundation in data infrastructure, sensor technology, and digital twins, smart algorithms cannot be productive. Thus, in industrial practice, AI remains a promise for the future but does not become an effective productivity lever (AI hype gap).

Software-Defined Manufacturing (SDM) as a New Key Competency

SDM decouples production control from physical hardware and creates a central software layer that makes manufacturing flexible, scalable, and cross-site. CIOs play a key role here: They become architects of the digital factory, responsible for IT/OT integration, data literacy, and investment prioritization. Companies with a CIO are significantly more likely to report familiarity with the SDM concept (+33.2 percent) and are more likely to integrate it into their overall strategy (+18.4 percent). In addition, the willingness to invest is rising (+13.8 percent), while budget allocation for maintenance costs is falling (-26.2 percent).

When comparing familiarity with the still-nascent SDM concept, India and China are leading the way: 30 percent of respondents in each country report “very high” familiarity. In the DACH region (3 percent) and the United Kingdom (6 percent), the proportion is significantly lower. The U.S. (14 percent) and Mexico (18 percent) fall in the middle.

Further upheavals are expected

Due to digitalization and software-driven approaches, the majority of respondents worldwide expect significant upheavals in the coming ten years. 31 percent are certain that their industry will undergo fundamental change, and another 51 percent consider it likely. There are again significant regional differences in this assessment: In India, 44 percent of respondents are convinced that software-driven approaches will transform their industry, while in the DACH region the figure is only 17 percent.

A key prerequisite for digitalization is a high willingness to invest: 71 percent of respondents from India state that their companies are prepared to make significant expenditures on new digital technologies. Mexico (65 percent) and the U.S. (59 percent) follow. The result for the DACH region is alarming: there, the willingness to invest stands at 29 percent.

“The DACH region focuses heavily on efficiency and cost optimization, which often leaves strategic potential for growth, flexibility, and innovation untapped,” comments Prof. Dr. Christina S. Reich of the FOM University of Economics & Management and a manager at MHP. “Meanwhile, emerging markets such as India, China, and Mexico are pursuing more differentiated strategic goals. For example, due to its historical competitive position and global pressure, India is specifically focusing on improving quality to meet international standards and tap into new markets.”

Overall, the results make it clear that Europe faces a massive modernization challenge. The key lever for international competitiveness lies in reducing technical debt, standardizing IT/OT structures, and consistently aligning production with software-based, scalable architectures. SDM is becoming a benchmark for industrial sustainability—and a critical success factor in the context of Industry 4.0.

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